IFRS Adoption in Ethiopia: A Critical Analysis of the Process, Issues and Implications.
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Date
2016-03
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Addis Ababa University
Abstract
This study examines the IFRS adoption process in Ethiopia with a view to explaining how
the state, i.e., the Ethiopian government, other national actors and the transnational
forces interacted in establishing the Ethiopian financial regulatory landscape as
antecedent to IFRS adoption and subsequent implementation. It employs a qualitative
research approach based on evidence collected through semi-structured interview and
review of documentary evidences produced in the process of IFRS adoption to explain the
outcomes of accounting reforms in Ethiopia during the period 1991-2015. By drawing on
Actor Network Theory (ANT), this study theorizes IFRS adoption as a product of a series
of translations in the context of interactions between supranational and national actors to
integrate Ethiopia into the global economic system through IFRS-based financial
reporting. Improved financial reporting environment supported by IFRS is theorized as a
key Obligatory Passage Point (OPP) for Ethiopia’s access to external finance and this in
turn led to the development of a streamlined national accounting regulatory system
through translation of institutions into a framework suitable for IFRS-based financial
reporting. The country’s accounting infrastructures and regulatory environment were
thoroughly evaluated and examined in a transformation process through which the
globalizing forces and Ethiopian actors built an actor-network that reconstructed the
Ethiopian accounting regulatory set up by issuing financial reporting law and
establishing the regulatory body (AABE). Accordingly, the country has mandated
officially the adoption of IFRS and designed and approved five years IFRS
implementation strategic plan for which its implementation is expected to be effected in
the years to come until 2019 deadline. This study illustrates that the IFRS adoption in
Ethiopia is the result of the translation processes involving the actor-networks of the
state, accounting, professionals, the private sector and international financial institutions
while the state, i.e., the Ethiopian government, played a management and mediating role
of the translation processes in the context of promoting macro-economic management
rationales of enhanced financial reporting supported by IFRS .The study shows that
while the Ethiopian IFRS adoption experience illustrates the macro-economic rationale
driven nature of IFRS adoption, the rationales and the processes of translating the idea
into Ethiopian context illustrates the socially constructed nature of IFRS adoption. This
study suggests that more resources and stakeholders need to be coordinated by AABE to
build the capacity of preparers in terms of IFRS reporting practices to achieve the IFRS
implementation strategic objectives. It suggests that self regulated, independent and
strong professional body needs to be established as soon as possible. It suggests that the
concerned stakeholders need to design and incorporate IFRS education in the curriculum
as soon as possible to meet the IFRS implementation strategic objectives.
Keywords: Accounting; Developing countries; Ethiopia; IFRS adoption
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Keywords
Accounting, Developing countries, Ethiopia, IFRS adoption